3 Reasons CEOs With Military Experience Make The Best Leaders

There's a new measure of how well prospective CEOs might lead a
company: whether they served in the military.

According to a new working
paper from the National Bureau
of Economic Research, military service has significance for
management styles and firm performances.
Overall, the authors identify three traits of CEOs who've served
in the military: They're more conservative financially,
less likely to be involved with corporate fraud, and better
equipped to steer firms through tough times.

We've broken those down in
greater detail below:

1. They are more
conservative with their financial and investment
policies. NBER researchers Efraim Benmelech and Carola
Frydman consider this finding slightly surprising, as prior
psychological research holds that military service can lead to
"aggressiveness, overconfidence, and increased risk-taking."
Their data suggests just the opposite: that CEOs with military
experience are more cautious in financial and investment
decisions.

2. They are less likely
to be involved in corporate fraud. Apparently
military experience makes a huge difference when it comes to
honesty. The researchers find that military CEOs are 70% less
likely than the average CEO to be involved in corporate
fraud. That's nothing to sneeze at.

3. They outperform
their peers in stressful times. Research shows that CEOs
with military experience are better able to offset the negative
effects of tough times than the average chief executive. While
Benmelech and Frydman aren't entirely sure why this is the case,
they suggest it's because veterans "learn how to make decisions
in extreme conditions during combat." They caution that while
military CEOs seem to have some advantages, they are not
associated with higher company valuations.

The researchers point out that
the number of CEOs in corporate America with military backgrounds
has dwindled steadily over the past 25 years, and they see this
as cause for concern.

"The reduction in the supply of
executives who have conservative investment policies, are less
prone to fraud, and are plausibly better equipped to navigate
through times of crisis may be detrimental for firms if these
skills cannot be easily provided to individuals through
alternative sources, such as MBA programs," they write.

Some of the best-known military
CEOs today are Daniel Akerson of General Motors, Lowell McAdam of
Verizon, Alex Gorsky of Johnson & Johnson, and Frederick
Smith of FedEx.